Does Personality Influence Agency Problems? The Role of the ‘Big Five’ Personality Dimensions

Abstract

This study examines the role that personality plays in the four determinants of agency problems, known in the literature as direct wealth transfer, asset substitution, underinvestment and overinvestment. The study involves a questionnaire-based survey of employees from the banking sector in Cyprus. A total of 231 full time employees assessed the personality traits of 58 supervisors, a few months before the 2013 financial crisis. The findings do not support the relation between the personality dimensions and agency problems. However, the findings revealed that the reverse-scoring of the negatively-keyed items of conscientiousness supported the independence of another construct, which we have chosen to name ‘non-conscientiousness’. Non-conscientiousness was significantly and positively related with one of the four agency problems (i.e., under investment). This finding suggests that taking into account the components of conscientiousness and ‘non-conscientiousness’ might provide the beginning of understanding which of the personality traits influence ethical leader behaviour and its consequences on agency problems in the financial sector. The limitations of the study and directions for future research are discussed.